What is the PV of the receipt of $5,000 per year for 5 years at 10%,...

What is the PV of the receipt of $5,000 per year for 5 years at 10%, then $2,500 per year for 5 years, at 12%?

Expert Solution

	Annuity PV Factor =	P [ 1 - ( 1 + r )^-n ]
		r

I)	PRESENT VALUE OF FIRST 5 YEAR ANNUITY
	Annuity PV Factor =	5000 * ( 1 - ((1 / (1 + 10%)^5)))
		10%

	Annuity PV Factor =	1895.393385
		0.1

	Annuity PV Factor =	18953.93


II)	PRESENT YEAR OF NEXT 5 YEAR ANNUITY = PRESENT VALUE OF 10 YEARS ANNUITY - PRESENT VALUE OF FIRST 5 YEARS ANNUITY FOR $ 2500 PER YEAR
	PRESENT YEAR OF NEXT 5 YEAR ANNUITY = A - B
A)	Annuity PV Factor =	2500 * ( 1 - ((1 / (1 + 12%)^10)))
		12%

	Annuity PV Factor =	1695.066909
		0.12

	Annuity PV Factor =	14125.56


B)	Annuity PV Factor =	2500 * ( 1 - ((1 / (1 + 12%)^5)))
		12%

	Annuity PV Factor =	1081.432861
		0.12

	Annuity PV Factor =	9011.94


	PRESENT YEAR OF NEXT 5 YEAR ANNUITY = A - B
	14125.56 - 9011.94
	5113.62


TOTAL PRESENT VALUE OF ANNUITY =		I + II
		18953.93 + 5113.62
		24067.55

jeff jeffy answered 3 years ago

What is the PV of $779 per year for 5 years if the required return is...

What is the PV of $779 per year for 5 years if the required return is 8.5% (assume the $779 payments come at the end of each of the next 5 years)? Answer to 2 decimal places.

What is the PV of $100 per year for 5 years with a lump sum in...

What is the PV of $100 per year for 5 years with a lump sum in year 5 of $1,000 if the rate is 5%

What is the value of receiving $5,000 per year starting in one year for 10 years...

What is the value of receiving $5,000 per year starting in one year for 10 years assuming a 3% interest rate? What if the $5,000 per year cash flows start in 9 years and continue for 12 years?

$800 per year for 10 years at 10%. $ $400 per year for 5 years at...

$800 per year for 10 years at 10%. $ $400 per year for 5 years at 5%. $ $800 per year for 5 years at 0%. $ Now rework parts a, b, and c assuming that payments are made at the beginning of each year; that is, they are annuities due. Present value of $800 per year for 10 years at 10%: $ Present value of $400 per year for 5 years at 5%: $ Present value of $800 per...

April Stigum will receive a 10-year annuity of $5,000 per year, beginning 5 years from today....

April Stigum will receive a 10-year annuity of $5,000 per year, beginning 5 years from today. In other words, the first payment will be made at the end of year 5. Assuming a required rate of return of 6%, calculate the present value today of her annuity. (Enter a positive value and round to 2 decimals).

Project X is expected to generate cash flows of $5,000 per year for 5 years and...

Project X is expected to generate cash flows of $5,000 per year for 5 years and its initial cost is $17,000. Project Y is mutually exclusive to Project S. Project Y costs $30,000, and its expected cash flows would be $8,750 per year for 5 years. If both projects have a WACC of 12%, what is the IRR of the better project? a)12.00% b)14.85% c)13.65% d)14.05% e)14.40%

An investment pays $2,500 per year for the first 4 years, $5,000 per year for the...

An investment pays $2,500 per year for the first 4 years, $5,000 per year for the next 3 years, and $7,500 per year the following 9 years (all payments are at the end of each year). If the discount rate is 11.85% compounding quarterly, what is the fair price of this investment? Work with 4 decimal places and round your answer to two decimal places. For example, if your answer is $345.667 round as 345.67 and if your answer is...

Annuities: 4 questions Q1: -PV: I save $200/year for 20 years at 5%. What is the...

Annuities: 4 questions Q1: -PV: I save $200/year for 20 years at 5%. What is the present value of these savings? Q2: -FV: I save $200/year for 20 years at 5%. How much will I have in 20 years? Q3: -Payment: I want a $ 1 million in 25 years. I can earn 7% annually. How much do I need to save each month? Q4: -Rate: I invest $250,000 and receive $20,000/year for next 20 years, what rate am I...

I plan to spend $5,000 in a year. If the interest rate is 5% per year,...

I plan to spend $5,000 in a year. If the interest rate is 5% per year, how much should I save today?

You invest in a project that will pay you $500 per year for 5 years and then pays $750 per year for the following 10 years

You invest in a project that will pay you $500 per year for 5 years and then pays $750 per year for the following 10 years (assume that all payments are made at the end of the year). You require a 6% rate of return on this type of investment. Give your return requirement, what is the maximum amount that you would be willing to pay today for the cash flow stram associated with this project? Round only your final...

Question